May 2013: Talk Can Prove Costly

It’s early morning on Monday, April 22, and I’m writing this letter from church—the Variety Cafe on Broadway, just opposite the BNY Mellon building. I’m in New York this week for Waters’ inaugural Sell-Side Technology Awards, an event that has got me thinking about what exactly makes a successful financial services technology vendor. After all, pretty much all technology vendors agree that possessing cutting-edge technology guarantees them a slot on the starting line—but not necessarily success in the race.

A number of years ago in London, a senior staff member from a successful buy-side-focused technology vendor was sensationally removed by security from the premises of one of the City’s largest fund managers after his tirade at the firm’s CIO, who had just informed him that he had decided to implement a rival vendor’s front-office platform. I didn’t witness the incident, although I did, a while later, receive an incendiary email from this person that led me to conclude that what had allegedly transpired was not only possible, but likely too. The point is, people talk, and it wasn’t long before news of this incident permeated most areas of the buy-side technology space.

What became clear in the wake of this episode is that the quality of the vendor’s technology became largely inconsequential to prospective clients. Of more concern to them was the prospect of having to live with this individual on a long-term basis. I cannot state with any certainty that contracts were squandered as a direct result of that outburst, but I remember chatting to a number of the firm’s existing clients who were alarmed and unimpressed by the incident. Petulance, it seems, will be tolerated … but only for so long.

Financial services CIOs are equally familiar with the flip side of that argument: Contracts can be inked on the reliability and amenability of the vendor’s staff. Sure, a firm handshake, a bit of back-slapping and all the kind words in the world are never going to compensate for below-par technology, but in the ultra-competitive post-financial crisis world of the capital markets, technology firms with sub-standard offerings simply do not survive. So, given that most of the technologies on offer to financial services firms are available from an array of vendors, and that selecting one offering over any other is unlikely to provide a competitive advantage, the issue of which vendor a firm chooses to partner with, and the criteria—other than pure technology ones—against which vendors are evaluated, becomes crucial.

Civility in the financial services industry, like all other walks of life, is hugely underestimated. It turns out that talk isn’t so cheap after all—it can prove pretty expensive, too.